Note: This story has been updated with additional information from an earlier version.

The Michigan House of Representatives moved forward a higher education budget bill earlier this month that would leave overall funding flat but radically change how the state supports its 15 public universities.

Under this new approach, the state appropriation for the University of Michigan’s Ann Arbor campus would be cut by nearly $40 million in the next fiscal year, a move that U-M leaders say would further transfer financial responsibility for the cost of education to students and their families. The university received $322.9 million from the state during the current fiscal year.

The proposal — derided by a number of business and higher education leaders across the state — calls for a simplified per-in-state-student funding model that would phase in over three years. Historically, discussions about state funding for public universities have considered each school’s unique mission and capacities, not just the number of students. Lawmakers did not consult with higher education leaders before introducing this new approach to funding the state’s public universities.

The result would be a redistribution of millions of dollars from the state’s research universities to several of its other public universities without any additional state support, putting at risk the university’s long-held commitment to ensuring that in-state students from all socioeconomic backgrounds have access to a world-class education.

Meanwhile, the state Senate overwhelmingly passed a proposal that reflects Gov. Gretchen Whitmer’s recommendation to provide a 2 percent one-time increase in state funding for each university for fiscal year 2021-22. The Senate bill was approved earlier this month on a bipartisan basis, 33-2.

In a letter written this month to House Appropriations Chair Thomas Albert, R-Lowell, President Mark Schlissel called the House proposal a “drastic move” that “does little to advance our state’s goals around improved postsecondary education and meeting the workforce needs of an evolving state economy.”

“Michigan ranks below the national average in postsecondary degree attainment and 33rd in median household income,” Schlissel wrote. “This is not coincidental. The data have shown consistently that workers with higher levels of education earn higher wages, yet Michigan ranks 44th in per-capita support for higher education.”

If adopted, the proposed funding model would make U-M and Michigan State University the two lowest state-funded Big Ten universities within three years. UM-Dearborn and UM-Flint would see significant gains in funding under the House proposal, as would other universities including Grand Valley State University and Oakland University.

The proposed reduction in U-M’s funding comes despite estimates of year-to-date state revenue being up more than $500 million from January 2021 estimates, and more than $18 billion in federal stimulus funding being directly allocated to Michigan and not yet appropriated.

“Instead of a new funding structure that radically redistributes an already insufficient level of support, our state needs to invest more to make a high-quality college education more affordable to Michigan families — at least to the level of our peer institutions and neighboring states,” Schlissel wrote.

A number of prominent Michigan business leaders have also voiced their concern over the House plan, saying recently that it was important to maintain funding for Michigan’s universities so businesses will be able to tap the highly educated college graduates and research they need as the economy recovers.

“I hope our lawmakers realize that one of the most important assets a state can have is universities that produce graduates who keep the economic engine running,” said Mike Jandernoa, chairman of the Grand Rapids-based private equity firm 42 North Partners. “While I want to see all universities supported well, our top-ranked research universities invest more to train graduates in high-demand jobs and deserve to have that reflected in their state funding.”

Others who have come out in favor of maintaining funding for higher education include Howard Ungerleider, president and chief financial officer for Dow; Jim Hackett, former CEO of Steelcase and Ford Motor Co.; and Paul Glantz, chairman of Emagine Entertainment.    

The House could drive up tuition costs and keep universities from having the kinds of facilities and top faculty that would enable students to gain the skills they need to be leaders in their fields, said Britany Affolter-Caine, executive director of the University Research Corridor, a collaboration of the state’s top three research universities — U-M, Michigan State and Wayne State.

“Continued disinvestment in higher education means universities can’t offer the cutting-edge facilities and top faculty that allow them to educate the top-level graduates businesses need,” Affolter-Caine said.

The Senate and House bills now move to conference committee. A final appropriations bill must be approved by the House and Senate and signed by the governor. The state’s new fiscal year begins Oct. 1. The Board of Regents customarily approves the university’s budget for the coming year in June.

Since 2001, U-M has become increasingly reliant on tuition, research grants, fundraising and other sources of revenue to offset the declining share of support from state appropriations. In 1970, state funding accounted for 64 percent of the Ann Arbor campus general fund, while this year it covered only 14 percent.

Further state funding cuts would jeopardize U-M’s ability to provide an affordable education to the state’s students and families through its institutional financial aid programs, Schlissel wrote. More than one-quarter of in-state students at U-M — those from low-income backgrounds — pay no tuition.

“That’s about 4,500 future doctors, engineers, entrepreneurs, etc., who may not otherwise have been able to access a world-class education,” Schlissel wrote.

In a statement released this month, the Michigan Association of State Universities called on the state to “increase, not disrupt, its support for higher education,” and pushed for a 10 percent increase in funding for all of Michigan’s 15 public universities. U-M is a member of the Michigan Association of State Universities.

“The universities are the driving force for the state’s economy,” the statement read. “A 10 percent increase for all universities — not just for some, and certainly not a decrease for some — will help these institutions hold down tuition and meet the needs of the state’s employers.”

Previous higher-education funding models acknowledged the differing cost to educate students in vastly different areas of study and research, wrote Schlissel, adding that training for different fields requires significantly different resources.

While the House budget proposal incorporates a $33.3 million distribution for each of the state’s three research universities, the overall appropriation would significantly decrease funding for both U-M ($39.5 million) and Wayne State University ($8.2 million) next year. Michigan State would see an overall $3.6 million increase in the first year of the new model.

“Our budgetary needs reflect our position as the nation’s top public research university with achievements spanning nearly every field of science, engineering, medicine, social sciences, and the humanities, from driverless car technology to the delivery of quality K-12 education,” Schlissel wrote. “Our discoveries help launch new businesses and our graduates attract outstanding employers to our state. These are key aspects of our mission, and our state is better off for it.”

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